3 Predictions for the New Week

I went out on a limb last week, and now it's time to see how that decision played out.

  • I predicted that Apple (NASDAQ: AAPL  ) would move higher on the week. Despite the consumer-tech giant's challenges over the past year, I thought support for iOS during the Consumer Electronics Show expo in Las Vegas would help boost enthusiasm for Apple. The stock was trading higher on the week through Wednesday's close, but then it buckled under on back-to-back trading day dip. Apple shares closed 1.5% lower on the week. I was wrong.
  • I predicted that the tech-heavy Nasdaq would outperform the Dow Jones Industrial Average. (DJINDICES: ^DJI  ) . This has been a tricky call lately, so how did it play out this time? Well, this was a mixed week for stocks. The Nasdaq moved 1% higher, and that was more than enough to beat the Dow and its 0.2% slide. I was right.
  • My final call was for Apollo Education Group (NASDAQ: APOL  ) to beat Wall Street's income estimates in its latest quarter. The provider of for-profit post-secondary education has been routinely beating Wall Street projections over the past year. I was banking on a repeat performance. It came through by posting a profit of $1.14 a share, blowing past the $0.90 the pros were forecasting. The strong report resulted in Apollo soaring 14% on the day. I was right.

Two out of three? I can do better than that. Let me once again whip out my trusty, dusty, and occasionally accurate crystal ball to make three calls that may play out over the next few trading days.

1. Kinder Morgan will miss Wall Street's profit target
Kinder Morgan (NYSE: KMI  ) is an energy giant that operates the country's largest network of natural gas pipelines. Natural gas has become a cost-effective energy source, and Kinder Morgan is there to make sure the energy source is transported across the nation.

However, Kinder Morgan has also been a bit of a disappointment lately. It has come up short against analyst profit estimates in each of the past three quarters. Wall Street's looking for a profit of $0.35 a share this quarter, but the trend heading into Wednesday's report isn't very encouraging.

My first call is for Kinder Morgan to earn less than analysts are forecasting.

2.The Nasdaq Composite will beat the Dow this week
Tech has been a big winner in recent years, so betting on tech over stodgy blue chips has been a good bet for me more often than not.

I'm going to stick with this pick, even if it's been a bad bet a few times lately. This is the time for Nasdaq's growth stocks to shine. January has historically been a good time for growth stocks, and the market is ripe for the tech-stacked secondary stocks to continue to outpace the 30 megacaps that make up the Dow Jones Industrial Average.

3. Wells Fargo will beat Wall Street's earnings estimates
Some stocks are just flat-out better than others.

Wells Fargo (NYSE: WFC  ) is one of a powerful handful of the "too big to fail" banks. Like other major financial institutions, Wells Fargo isn't exactly a darling in the eyes of the public, but it remains an important provider of loans, CDs, checking accounts, and other banking products and services.

Another thing it does is make analysts look like perpetual underachievers. If analysts say the company posted a profit of $0.98 a share in its latest quarter, I'll argue that it held up better than that. History's on my side!

One of my best tricks to beating the market is finding stocks that perpetually land ahead of the prognosticators. Let's go over the past year of earnings reports.

Quarter

EPS Estimate

EPS

Surprise

Q4 2012

$0.89

$0.92

3%

Q1 2013

$0.88

$0.92

5%

Q2 2013

$0.93

$0.98

5%

Q3 2013

$0.97

$0.99

2%

Source: Thomson Reuters.

Things can change, of course.

New mortgage and refinancing applications have started to dry up as rates move higher. One can also argue that Wells Fargo has beaten the market by no more than a mere 5% over the past year.

However, it's hard to argue against the trend. Everything seems to be falling into place for another market-thumping quarter on the bottom line.

Three for the road
Well, that's three predictions right there. Let's see how I fare this week. Meanwhile, always remember that there's a huge difference between a good stock and a stock that can make you rich. The Motley Fool's chief investment officer has selected his No. 1 stock for 2014, and it's one of those stocks that could make you rich. You can find out which stock it is in the special free report: "The Motley Fool's Top Stock for 2014." Just click here to access the report and find out the name of this under-the-radar company.


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Comments from our Foolish Readers

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  • Report this Comment On January 12, 2014, at 5:21 PM, jawscclaws wrote:

    Hey Rick,

    Why waste time with your mediocre adise for the faint of heart. The Bio-tech/med/pharm sector is on fire and with one of the largest conference to kick off this week (01/13 - 17/2014) pick winners such as my three (3): ISIS, CYTR and TTHI. Good luck with you selections, but, many and more happy returns with this sector.

  • Report this Comment On January 13, 2014, at 8:25 AM, JoeB9936 wrote:

    I have been reading this Mr. Munarriz's "predictions" for about a year now and his average is to be wrong 33% of the time. And he always says: "I can do better than that: when incorrect. Glad I am not investing based on his advice or predictions or I'd be broke (or at least down 33% on investments). Where I worked and went to school, a 66% performance rate is a failure and you would flunk out or be fired. How does he keep doing this column with this success rate. Motley Fool is truly a fool to keep him on.

  • Report this Comment On January 14, 2014, at 9:15 AM, TMFBreakerRick wrote:

    JoeB, I appreciate the feedback, but anything north of 50% in these binary scenarios would be a win in my book. If someone called a coin flip correctly two thirds of the time that wouldn't be a success? If you made $1,000 two thirds of the time and lose $1,000 a third of the time that wouldn't be a success?

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